Gerken Paving Inc. v. Lasalle Group Inc. ( 2014 )

NOT RECOMMENDED FOR FULL-TEXT PUBLICATION
File Name: 14a0165n.06
FILED
No. 12-2380 Feb 28, 2014
DEBORAH S. HUNT, Clerk
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
GERKEN PAVING INC., )
)
Plaintiff-Appellant, )
)
v. ) ON APPEAL FROM THE UNITED
) STATES DISTRICT COURT FOR THE
LASALLE GROUP INC., ) EASTERN DISTRICT OF MICHIGAN
)
Defendant-Appellee. )
Before: BATCHELDER, Chief Judge; COOK and O’MALLEY*, Circuit Judges
O’MALLEY, Circuit Judge. This is a dispute arising out of a construction contract.
Gerken Paving Inc. (“Gerken”) appeals the district court’s order granting summary judgment and
awarding attorneys’ fees to LaSalle Group Inc. (“LaSalle”). The district court found Gerken not
entitled to additional payment based on asphalt overages during paving because it failed to
submit a written request in accordance with the contract governing that work. It also denied
Gerken funds withheld by LaSalle as retainage based on Gerken’s failure to pave an outlot and
complete certain punchlist items. Subsequently, the district court awarded the remainder of the
retainage as attorneys’ fees in accordance with the parties’ contract. For the reasons provided
below, we affirm the district court’s grant of summary judgment regarding the asphalt overages,
the retainage, and the award of attorneys’ fees.
*
The Honorable Kathleen M. O’Malley, Circuit Judge for the United States Court of Appeals for the
Federal Circuit, sitting by designation.
No. 12-2380
Gerken Paving, Inc. v. LaSalle Group, Inc.
I. Background
A. The LaSalle-Gerken Contract
LaSalle, a Michigan general contractor, entered into a contract with non-party Menard,
Inc. (“Owner”) to build a home improvement store in Oregon, Ohio. On July 18, 2007, LaSalle
entered into a fixed price subcontract (“Project”) with Gerken, an Ohio paving company, to pave
the access roads and parking lots for the Project, including an outlot on Curtis Road, and to
complete the items on a punchlist. In return, LaSalle agreed to pay Gerken a fixed price of
$545,705.00. The contract required Gerken to pave in accordance with Ohio Department of
Transportation (“ODOT”) guidelines, which set a minimum air temperature for paving of 40 °F.
According to the contract, a non-party would complete the preliminary grading work by October
26, 2007. Then, Gerken would need to finish all asphalt paving by November 16, 2007, and the
entire Project no later than December 3, 2007. The contract also required Gerken to provide a
two year warranty on all completed work.
The contract included provisions governing Project changes. Section 5.2 provided that
“[u]nless otherwise directed by [LaSalle] in writing, any increase or decrease in [Contract] price
and time of performance resulting from changes shall be agreed upon in writing by the parties
hereto in advance of performance of the work.” (emphasis added). Section 5.4 required that
“[a]ny claim for an increase in the Subcontract price . . . based upon Contractor’s written or
verbal order, . . . must be made by Subcontractor to Contractor, in writing, within five
(5) working days . . . [or] in any event prior to starting work involved in the claim; otherwise, the
claim shall be barred. All such written claims must furnish full details and supporting
documentation.” (emphasis added). Section 5.5 provided that “[Gerken] shall not be entitled to
any increase in the [Contract] price . . . unless the amount of any such increase . . . has been
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Gerken Paving, Inc. v. LaSalle Group, Inc.
agreed upon in writing, accepted by Owner . . . and as a condition precedent, paid by Owner to
[LaSalle].” And, Section 5.6 included a provision regarding requests by LaSalle or the Owner
for “extra work” beyond the contract.
The contract further allowed LaSalle to withhold payments to Gerken if Gerken breached
any provision of the contract or if LaSalle had a reasonable doubt about whether Gerken could
complete the work in a timely and proper manner.1 If LaSalle retained any payments, it was
authorized to use the retained money to pay for the unfinished work. The contract also included
a provision that shifted attorneys’ fees to Gerken if any dispute over the contract resulted in a
decision in favor of LaSalle, either in whole or in part.
B. Contract Performance
While the contract required third-party contractors to complete all preliminary grading
work by October 26, 2007, none of that work was completed until mid-November and it was not
fully complete until November 28. Neither Gerken nor LaSalle caused that delay. The grading
delay prevented Gerken from doing any paving until November 12, 2007, over two weeks after
the projected start date for that work. Gerken paved the portions of the lot which were graded on
November 12, 13, and 14. It did so in above 40 °F weather, as required by the ODOT guidelines.
During these three days, Gerken exceeded the amount of asphalt it had projected by over four
hundred tons.
1
Section 2.4 states that “[p]rogress payments and final payment may be withheld in whole or in part by
[LaSalle] on account of: . . . (c) any breach by [Gerken] of any provision of this Subcontract . . . [or] (f) a reasonable
doubt that [Gerken], for any reason, is able to timely and properly complete the Subcontract work[.] . . . If the said
causes are not so remedied . . . [LaSalle] may remedy the same for [Gerken’s] account and charge the entire cost
thereof to [Gerken].”
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Gerken Paving, Inc. v. LaSalle Group, Inc.
Once the grading was completed, Gerken prepared to resume paving on November 28,
2007. On November 27, the weather report predicted that it would be colder than 40 °F on
November 28. In response to the sub-40 °F weather report, Gerken asked LaSalle to sign a letter
acknowledging that Gerken would not warranty the paving performed in sub-40 °F on November
28. LaSalle agreed. LaSalle signed similar statements on November 29 and 30, and December
2, 5, 12, 14, and 15. There was no mention of the need to use additional asphalt for the paving
work in any of those letters.
On November 29, 2007, LaSalle approved two written field directives authorizing an
increase in the contract price “to install additional base paving material at the board shead [sic]
area whitch [sic] is from the catch basin line to 13 feet from the board shed” due to “Hidden
Conditions.” The first field directive increased the subcontract price on a “time and materials”
basis not to exceed $2,000. Later that day, LaSalle approved a second written field directive
increasing the amount of the first directive to $4,000. Though LaSalle did not execute any
written field directives during the Project regarding the use of additional asphalt, Gerken claims
that LaSalle employees verbally instructed Gerken to continue paving and promised payment for
asphalt overages.
On December 15, 2007, Gerken finished paving the main area of the Project. Between
November 29 and December 15, Gerken used more asphalt than projected every day. During
this period, Gerken accrued $94,848.68 in total asphalt overages ($57,916.76 in leveling
overages and $36,931.92 in surface overages). Gerken claims that its employees provided
LaSalle with a written calculation of the asphalt overages after each day of paving.
Although Gerken completed paving the main site, it did not pave the Curtis Road outlot
because the local municipality, the city of Northwood, shut down the worksite due to inclement
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Gerken Paving, Inc. v. LaSalle Group, Inc.
weather. On December 20, 2007, Gerken wrote a letter to LaSalle explaining that it had used
significantly more asphalt to complete the job than expected. The letter contained prices for the
additional asphalt used, but Gerken did not expressly ask LaSalle to pay for the overages. On
March 3, 2008, Gerken submitted a payment application to LaSalle for the additional
$94,848.68. On March 26, 2008, LaSalle responded to Gerken, refusing to pay for the asphalt
overages because the parties had a fixed-price contract.
In Spring 2008, LaSalle demanded that Gerken pave the outlot and fix certain punchlist
items. On May 23, 2008, Gerken responded that it would not pave the outlot unless LaSalle
agreed to a $7,442.00 price increase because the cost of petroleum had increased in the interim
months. Then, on June 3, 2008, Gerken sent LaSalle a detailed day-by-day description of the
asphalt overages Gerken incurred on the Project, and asked LaSalle to pay for the overages. On
June 12, 2008, LaSalle sent an email informing Gerken that, if Gerken did not pave the outlot by
the following Monday, LaSalle would pave it at Gerken’s expense. Gerken did not pave the
outlot. LaSalle also demanded that Gerken fix the items on a punchlist, such as filling in low
spots and cracks in the asphalt in the areas Gerken had paved. Gerken responded that it would
not fix the items on the punchlist because LaSalle waived the warranty for that work. Based on
Gerken’s refusal to pave the outlot and complete the punchlist items, LaSalle retained the final
ten percent of the fixed-price contract value, claiming it was authorized to do so under the
contract. By this point, LaSalle had already paid Gerken $491,134.50. LaSalle employed a third
party to pave the outlot for $20,000 and complete the punchlist items for $4,880.2
2
The district court states that “LaSalle stated it had a third party pave the outlot at a cost of $24,880.00.” It
appears, however, that LaSalle paid $20,000 to pave the outlot and that LaSalle paid between $4,000 and $4,880 to
complete the punchlist items.
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No. 12-2380
Gerken Paving, Inc. v. LaSalle Group, Inc.
C. Procedural Background
On April 28, 2011, Gerken filed a First Amended Complaint against LaSalle seeking
payment for the asphalt overages and the withheld retainage. First Amended Complaint and Jury
Demand, Gerken Paving Inc. v. LaSalle Grp. Inc., No. 10-cv-14905 (E.D. Mich. Apr. 28, 2011),
ECF No. 8. On April 30, 2012, LaSalle moved for summary judgment claiming that Gerken’s
failure to comply with the provisions in Section 5 of the contract barred its claims for the asphalt
overages and that LaSalle was entitled to the retainage because Gerken failed to complete the
final phase of the Project. Mot. Summ. J., Gerken Paving Inc. v. LaSalle Grp. Inc., No. 10-cv-
14905 (E.D. Mich. Apr. 30, 2012), ECF No. 22. On July 30, 2012, the district court granted
LaSalle’s motion for summary judgment, and dismissed Gerken’s complaint in its entirety.
Gerken Paving Inc. v. LaSalle Grp. Inc., No. 10-cv-14905, 2012 WL 3079249, at *1 (E.D. Mich.
July 30, 2012). The district court found that the contract unambiguously required that all
changes be requested and agreed to in writing. Id. at *6. Specifically, the district court found
that: (1) Section 5.6 did not waive Section 5.4’s requirement to submit claims for an increase in
the contract price in writing; (2) Gerken failed to meet the writing requirement with respect to
any asphalt overages; (3) this failure was notable given Gerken’s compliance with the
requirements of Section 5 when seeking a waiver of warranty from LaSalle for work in below 40
°F conditions. Id. at *6-7. For these reasons, the district court found that Gerken was not
entitled to compensation for the asphalt overages. Id. In addressing the retainage issue, the
district court noted that LaSalle acknowledged that it owed Gerken the portion of the retainage
that exceeds the cost of paving the outlot and repairing the punch list items. Id.
On September 25, 2012, the district court denied Gerken’s motion to vacate, alter, or
amend the judgment, and granted LaSalle’s motion for attorneys’ fees. Order, Gerken Paving
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Gerken Paving, Inc. v. LaSalle Group, Inc.
Inc. v. LaSalle Grp. Inc., No. 10-cv-14905 (E.D. Mich. Sept. 25, 2012), ECF No. 38. The
district court denied Gerken’s motion to vacate, alter, or amend the judgment as an untimely
motion for reconsideration. Id. at 2. It found that Gerken failed to demonstrate any defect in the
court’s reasoning that would lead to a different result. Id. The district court then granted
LaSalle’s motion for attorneys’ fees, finding LaSalle entitled to attorneys’ fees under Section
13.4 of the Subcontract because LaSalle was the prevailing party in their dispute. Id. While
LaSalle’s attorneys’ fees amounted to $48,827.00, LaSalle only requested the balance of the
retainage kept by LaSalle, which LaSalle calculated as $27,219.55. Id. at 3. The district court
granted LaSalle this reduced amount. Id. In reaching this conclusion, it rejected Gerken’s
arguments that the fee provision was void as a penalty clause. Id. at 2. It also found Gerken’s
arguments regarding the unreasonableness of the fees unpersuasive. Id. at 2-3. In support, the
district court noted that the Defendant “demonstrated the reasonableness of the fees and its
compliance with [the Smith factors].” Id. at 3. It also found that the “Defendant demonstrated its
diligence in reporting hours and provided evidence that the hourly rates charged compare
with[in] the prevailing rates with the community for similar services.” Id. Based on the reduced
fee to which LaSalle agreed, the court calculated the effective hourly rate at approximately
$104.00 per hour, which it characterized as a “reasonable fee.” Id. Ultimately, the court granted
LaSalle the remainder of the retainage it requested, $27,219.55. Id.
Gerken appeals the district court’s dismissal of its claims on summary judgment and the
grant of LaSalle’s attorney’s fees. We have jurisdiction under 28 U.S.C. § 1332(a) and
28 U.S.C. § 1291.
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Gerken Paving, Inc. v. LaSalle Group, Inc.
II. Discussion
This court reviews a district court’s grant of summary judgment de novo. Hopson v.
DaimlerChrysler Corp., 306 F.3d 427, 432 (6th Cir. 2002). Summary judgment is proper where
no genuine issue of material fact exists and the moving party is entitled to judgment as a matter
of law. Fed. R. Civ. P. 56(a). The moving party bears the burden to show that no genuine
dispute as to any material fact exists. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). Once
the moving party establishes that it is entitled to summary judgment, the non-moving party then
bears the burden to prove otherwise. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 256-57
(1986). For purposes of summary judgment, evidence must be viewed in the light most
favorable to the non-moving party. Adickes v. S. H. Kress & Co., 398 U.S. 144, 157 (1970).
This court also reviews de novo a Rule 59(e) motion seeking reconsideration of a grant of
summary judgment. Columbia Gas Transmission, Corp. v. Ltd. Corp., 951 F.2d 110, 112 (6th
Cir. 1991).
A. Asphalt Overage Charges
Generally, the interpretation of a contract is reviewed de novo. Meridian Leasing, Inc. v.
Associated Aviation Underwriters, Inc., 409 F.3d 342, 346 (6th Cir. 2005); Klapp v. United Ins.
Grp. Agency, Inc., 663 N.W.2d 447, 451 (Mich. 2003). If a contract uses clear and unambiguous
language, the court should not look to extrinsic facts to establish the parties’ intent. Moore v.
Kimball, 289 N.W. 213, 215 (Mich. 1939); Mich. Chandelier Co. v. Morse, 297 N.W. 64, 67
(Mich. 1941) (finding that the “court does not have the right to make a different contract for the
parties or to look to extrinsic testimony . . . when the words used by them are clear and
unambiguous.”). In making such a determination, the court reads the contract as a whole, giving
the contract language its ordinary and natural meaning. City of Wyandotte v. Consol. Rail Corp.,
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Gerken Paving, Inc. v. LaSalle Group, Inc.
262 F.3d 581, 585 (6th Cir. 2001). Here, the contract specifies that Michigan law governs; we
therefore apply Michigan law.
Section 5 of the contract pertains to “Changes/Claims.” Section 5.2 provides that “any
increase or decrease in the Subcontract price and time of performance resulting from changes
shall be agreed upon in writing by the parties hereto in advance of performance of the work.”
Section 5.4 further defines the requirements for submitting a claim for an increase in price,
stating that:
Any claim for an increase in the Subcontract price or time for
performance based upon Contractor’s written or verbal order . . .
must be made by Subcontractor to Contractor, in writing, within
five (5) working days from the date of such claimed order, act or
omission, or at such earlier date required by the Subcontract
Documents but in any event prior to starting work involved in the
claim; otherwise, the claim shall be barred. All such written claims
must furnish full details and supporting documentation.
(emphasis added). Under Sections 5.2 and 5.4, the contract terms clearly and unambiguously
require Gerken to submit a claim in writing prior to starting work involved in the claim. Gerken
alleges that it provided daily reports regarding the volume of asphalt used, and sent LaSalle two
letters regarding asphalt overages after completing the paving of the main areas. Gerken did not
submit a claim for an increase in the contract price to cover asphalt overages in writing prior to
commencing the work, however. Therefore, we find Gerken’s claims for asphalt overages
barred.
Gerken argues that its claim falls under Section 5.6, not Section 5.4. We disagree.
Section 5.6 pertains to “extra work;” it states:
To the extent that LaSalle, the Owner, or the Owner’s
Representative request that extra work be performed, including,
but not limited to, R.F.Q.’s, Bulletins, C.C.D.’s, Field Orders,
Field Directives, and the like, [Gerken] agrees to provide an
accurate, detailed price quotation with detailed labor and material
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Gerken Paving, Inc. v. LaSalle Group, Inc.
breakdowns (broken down by item) and associated back-up
including man hours, daily reports, invoices, time sheets, receipts,
etc… no later than seven (7) business days from the request for
quote. If the work is to be performed on a time and material basis,
this detailed pricing must be submitted within five (5) business
days from the completion of the work. [Gerken] also agrees to
provide any additional supplemental information/back-up
requested (based on initial review of quotation) within five
(5) business days of the request for any/all additional work items.
To the extent [Gerken] fails to provide the requested quote(s) or
supplemental information/back-up required, [Gerken] waives its
right to any payment for the work and will be forced to accept the
amount(s) (if any) determined by LaSalle, the Owner, or the
Owner’s representatives to be owed for the work. This paragraph
only applies to extra work requested by the Owner, Owner’s
Representative, or LaSalle. Nothing in this paragraph effects [sic]
or impacts any other paragraph of this Agreement including, but
not limited to, the requirement that all claims must be in writing.
(emphasis added). In reviewing the four corners of the contract, we interpret the term “extra
work” in context to pertain to additional work not previously included in the contract, not
changes to work already encompassed by the contract. Here, the terms of the contract required
Gerken to pave specific areas; costs incurred in doing so do not constitute “extra work.” As
such, Gerken needed to comply with Sections 5.2 and 5.4 before it could seek an increase in the
subcontract price.
Even assuming the asphalt overages constituted “extra work” under a time and material
basis, Gerken failed to submit the necessary detailed pricing within five business days from the
completion of the work. While Gerken sent LaSalle a letter on December 20, 2007, that mailing
did not contain the necessary information. In particular, the letter failed to provide the labor and
material breakdowns by item with associated back-up as required in Section 5.6 including “daily
reports, invoices, time sheets, receipts, etc.” Gerken did not provide any additional details to
LaSalle until at least March of 2008.
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Gerken Paving, Inc. v. LaSalle Group, Inc.
Gerken also argues that it has raised questions of fact regarding its right to payment for
its asphalt overages. Specifically, it claims that LaSalle provided verbal assurances of payment
for the overages on which it reneged. It also claims LaSalle breached the contract by not
providing suitably graded surfaces in a timely manner. While the question of whether the
overages were the result of underbidding or weather conditions forced upon Gerken by the
grading delays is one of fact, like the district court, we do not need to reach that issue because
Gerken failed to comply with the writing requirements of Section 5 of the contract.
Thus, while issues of fact are in dispute, they are not material to the parties’ respective
obligations under the contract. Absent a written claim, we do not get to those factual disputes.
We reach the same conclusion with respect to Gerken’s argument regarding oral promises of
payment. The parties’ contract required that all changes relating to the price of current work be
in writing. Neither party could circumvent that obligation.
B. Attorneys’ Fees
This court reviews the interpretation of a contract de novo. Meridian Leasing, 409 F.3d
at 346. The right to attorneys’ fees is a legal issue, and Gerken does not dispute that the contract
provides this right. Gerken claims only that the fee provision is void as an improper penalty and
that the fee award, even if permissible, was excessive. The district court granted LaSalle’s
motion for attorneys’ fees, finding LaSalle entitled to attorneys’ fees under Section 13.4 of the
Subcontract because LaSalle prevailed on summary judgment. Order at 2-3, Gerken Paving, No.
10-cv-14905, ECF No. 38. While LaSalle’s attorneys’ fees amounted to $48,827.00, the district
court granted a reduced amount of $27,219.55 based on LaSalle’s agreement to accept the
remainder of the retainage as its attorneys’ fees. Id. at 3.
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Gerken Paving, Inc. v. LaSalle Group, Inc.
This court reviews the magnitude of a district court’s fee award for an abuse of
discretion. Hamlin v. Charter Twp. of Flint, 165 F.3d 426, 436 (6th Cir. 1999) (citation omitted).
“A district court abuses its discretion when it applies the incorrect legal standard, misapplies the
correct legal standard, or relies upon clearly erroneous findings of fact.” Hamad v. Woodcrest
Condo. Ass’n, 328 F.3d 224, 230, 237 (6th Cir. 2003) (quoting Schenck v. City of Hudson,
114 F.3d 590, 593 (6th Cir. 1997)).
Section 13.4 of the contract states that “[Gerken] shall also pay for all of [LaSalle’s]
attorney’s fees and costs of litigation . . . if the decision / dollar amount is in partial or full favor
of [LaSalle].”3 Because the district court entered summary judgment in favor of LaSalle, LaSalle
is entitled to attorneys’ fees per Section 13.4. Still, an award of attorneys’ fees is limited to a
reasonable fee. See Zeeland Farm Servs., Inc. v. JBL Enters., Inc., 555 N.W.2d 733, 736 (Mich.
Ct. App. 1996) (contract may include provision to pay other side’s attorneys’ fees, but recovery
is limited to reasonable attorney fees). Although the court stated that it “need not review the
Smith factors4 because Defendant agreed to the reduced amount of $27,219.55,” the district court
found that the Defendant “demonstrated the reasonableness of the fees and its compliance with
[the Smith factors].” Order at 3, Gerken Paving, No. 10-cv-14905, ECF No. 38. It also noted
that the “Defendant demonstrated its diligence in reporting hours and provided evidence that the
hourly rates charged compare with the prevailing rates within the community for similar
3
Gerken’s brief points to Section 7.3, which relates to indemnity. Appellant Br. 33. The section at issue,
however, is Section 13.4, which relates to attorneys’ fees regarding dispute resolution.
4
The Supreme Court of Michigan in Smith v. Khouri described several non-exclusive factors to consider in
determining reasonable attorneys’ fees: (1) the professional standing and experience of the attorney; (2) the skill,
time and labor involved; (3) the amount in question and the results achieved; (4) the difficulty of the case; (5) the
expenses incurred; and (6) the nature and length of the professional relationship with the client. 751 N.W.2d 472,
478-79 (Mich. 2008).
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services.” Id. The court then calculated the hourly rate for the reduced figure to be
approximately $104.00 per hour, and characterized that as a “reasonable fee.” Id. Gerken does
not seriously contend that an hourly rate of $104.00 is unreasonable.
Instead, Gerken asserts that the contract provision requiring it to pay for “all of
Contractor’s attorney’s fees and costs of litigation” is a penalty and void because it requires a
“fixed fee.” The contract provision, however, does not constitute a “fixed fee.” A “fixed fee”
has “no necessary relationship to the actual services performed.” Wilson Leasing Co. v. Seaway
Pharmacal Corp., 220 N.W.2d 83, 87 (Mich. Ct. App. 1974). The cases Gerken cites include a
set amount with no relationship to the actual services performed. See Kittermaster v. Brossard,
63 N.W. 75, 75-76 (Mich. 1895) (provision requiring party to pay forty dollars); Wright v.
Traver, 41 N.W. 517, 517-18 (Mich. 1889) (attorney fee pre-set as a percentage of recovery);
Bullock v. Taylor, 39 Mich. 137 (1878) (provision requiring payment of an attorney’s fee of
fifteen dollars). Unlike a “fixed fee,” the attorneys’ fees here were calculated based on the
services performed by attorneys in this litigation, not an amount fixed in advance. As such, it is
not a penalty.
Gerken argues that the attorneys’ fee provision also runs afoul of Rule 1.5 of the
Michigan Rules of Professional Conduct which states that “[a] lawyer shall not enter into an
agreement for, charge, or collect an illegal or clearly excessive fee.” Gerken claims that the lack
of any express reasonableness limitation in the provision renders it necessarily unreasonable and
excessive. Gerken further argues that the provision requiring the payment of “all” attorneys’
fees invites inflation of attorneys’ fees. We do not find Gerken’s arguments persuasive nor do
we find any need to address hypotheticals removed from the situation at hand. As noted above,
the contract provision allows for all attorneys’ fees and costs if LaSalle prevails. After
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determining that LaSalle prevailed, the district court found LaSalle demonstrated that the fees are
reasonable. It also did not find any inflation of the requested fees. We find no error in those
conclusions.
Because the contract provides for attorneys’ fees if LaSalle prevails, and the district court
did not abuse its discretion in awarding fees, we affirm the award of attorneys’ fees for the
amount constituting the remainder of the retainage.
C. Retainage
Sections 2.4 and 2.5 of the contract allowed LaSalle to withhold a percentage of the fixed
price to guard against any breach by Gerken, including a failure of timely or proper performance.
LaSalle then had the right to apply the retained money to the cost of completing or repairing
Gerken’s work. Here, LaSalle retained ten percent of the contract price because Gerken did not
pave the outlot or complete certain punchlist items. At the summary judgment motion hearing,
LaSalle “acknowledged that it owed Gerken the retention amount minus the cost of paving [the]
outlot, the cost of which LaSalle calculated to be $24,880.00.” Gerken Paving, 2012 WL
3079249, at *7.
Despite LaSalle’s concession, Gerken claims that questions of fact exist regarding alleged
breaches of contract because LaSalle: (1) failed to have the outlot ready for paving; and
(2) denied a price change reflecting an increase in the price of petroleum for the outlot asphalt
mix. The district court, however, found that LaSalle did not appear at fault for the delay. Also,
Gerken admits that the City of Northwood, not LaSalle, “wisely refused” to allow paving the
outlot to proceed based on the weather conditions. Appellant Br. 8, 26. The denial of the price
change also does not raise a question of material fact. No factual dispute exists that the contract
already required Gerken to pave the outlot and permitted LaSalle to pay for any unfinished work
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using the retainage. Section 2.4 of the contract provides that LaSalle may use the retainage to
cover the “entire cost” of paving the outlot, not just the amount it would have cost Gerken.
When Gerken refused to pave the outlot, LaSalle paid another company $20,000 to complete this
work. LaSalle paid this amount with money from the retainage.
Gerken also asserts it had no obligation to complete the punchlist items. While the
district court listed the cost of paving the outlot as $24,880, LaSalle admitted that paving the
outlot only cost $20,000. The amount of the cost of completing the punchlist items is unclear;
the parties and the district court have listed varying figures between $4,000 and $4,880 as
potential punchlist costs.5 The district court even noted that “[t]he record is unclear regarding
what punchlist items were requested and whether or not Plaintiff failed to complete them.”
Gerken Paving, 2012 WL 3079249, at *3. The district court also failed to address Gerken’s
arguments regarding the waiver of warranties and the impact of those waivers on its obligation to
complete the punchlist items. LaSalle did not respond to these allegations in its brief; LaSalle
only noted that it had to pay another contractor to complete the items.
Despite the apparent errors in the district court opinion regarding the precise amount of
the retainage that LaSalle had the right to retain, we find those errors or lack of clarity to be
harmless. Any reduction in the amount LaSalle had the right to charge for those items would
have been recoverable as part of the award of attorneys’ fees. A swing of a few thousand dollars
in the size of the retainage could not have rendered a fee award unreasonable when the fee
requested was over $20,000 less than the fees the trial court found actually and reasonably had
5
LaSalle claimed they spent $20,000 on paving the outlot and “over $4,000” to fix issues on the punchlist.
Aff. Scott Nemecek at 2, Gerken Paving Inc. v. LaSalle Grp. Inc., No. 10-cv-14905 (E.D. Mich. Apr. 30, 2012),
ECF No. 22 Ex. B.
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No. 12-2380
Gerken Paving, Inc. v. LaSalle Group, Inc.
been incurred. Therefore, we affirm the district court’s grant of summary judgment regarding
the retainage.
III. Conclusion
For the reasons discussed above, the court affirms the district court’s grant of summary
judgment regarding the asphalt overages, the retainage, and the award of attorneys’ fees for
LaSalle.
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